Baltimore water officials have been dogged in the past year by a series of extremely public problems: widespread billing errors that required millions in refunds, massive water main breaks that closed downtown streets, and a collapsed stormwater culvert that took five months and $7 million to fix.

Accompanying those issues has been criticism from customers, many of whom are upset with rising costs and what they see as lapses in service.

But city officials say that behind the scenes, they have been making progress on the city's aged and long-deteriorating water system.

Facing more than 1,000 water main breaks a year, Baltimore officials are making sure that individual projects conform with long-term goals, and setting strategies to make forward-looking — rather than reactive — investments, said Rudy Chow, the city's head of water and wastewater.

Officials are rolling out a new asset management division that is designed to boost efficiency. They recently submitted a new plan to the Environmental Protection Agency in an effort to balance their priorities with those of regulators, in part by asking for more time to complete federally mandated projects. They're planning a major capital project to upgrade meters and billing systems.

And they're negotiating a new cost-sharing agreement with some counties, asking them to contribute more to maintain a system that they rely on — as shown by the 2009 Dundalk water main break that flooded parts of Baltimore County and disrupted service in Anne Arundel.

Industry experts say the city is doing a lot of things right.

"I give them credit for actually tackling the problem, talking with other people, working on an integrated plan," said Greg DiLoreto, president of the American Society of Civil Engineers.

In 2011, the organization's state chapter gave the city a grade of C- for its improved water efforts — a middling mark, but in a nation where infrastructure woes are common, one that ranked Baltimore ahead of many other large cities.

To finance the upgrades, the city has substantially increased its capital improvements budget, in part by accepting ballooning levels of revenue bond debt, and has boosted baseline revenue by hiking water rates.

Jeff Eger, executive director of the Water Environment Federation, a nonprofit that studies utility best practices, said Mayor Stephanie Rawlings-Blake and other city leaders are "right on target" with their efforts.

Still, the number of massive water main breaks hasn't slowed. A large break in the Canton Industrial Park recently caused geysers to shoot into the air and part of Newkirk Street to collapse. And the problem of water-billing errors remains unresolved, leading to continued criticism.

Residents have complained that the city is placing the burden of its crumbling system on their backs.

"We're sick and tired of being taxed to death," Canton resident Joe Collins Jr. said in June, just before the Board of Estimates voted to approve a 9 percent water rate hike.

Others say that billing problems are continuing all across the city, and that officials remain ill-equipped to handle the situation.

"People write to me all the time, and I don't know what to tell them," said Linda Stewart, a well-known critic of the city's water billing process. The Curtis Bay woman railed against overcharges long before an audit flagged problematic bills and the city announced plans to issue millions in refunds.

Cory McCray, an Overlea resident and landlord along the Belair Road corridor, said he is "not sympathetic" to the city's problems.

McCray said he received poor customer service last year when he complained about a faulty meter. He said the issue was resolved only after he got City Council President Bernard C. "Jack" Young directly involved.

"I shouldn't have to get on the phone with my councilman every time I have a problem with the water department," he said. "The water department should be run efficiently. If we're going to be getting terrible customer service, we need to be paying a cheaper price."

The 9 percent hike last year followed a pattern of annual increases.Rates have more than doubled in the past decade, and the average annual water bill for a family of four is now $1,276, according to officials.

Cities across the country have seen similar hikes.

In Baltimore, the increases have significantly raised the city utility's annual operating revenue, officials say, from $84 million in 2002 to more than $129 million in 2011. Estimated revenue for the fiscal year 2013 is nearly $153 million.

The city has also increased spending on capital assets, including more than $12 million annually on "capital reactive water distribution system fixes," such as water main repairs.

In 2002, the city spent $34 million on capital assets, including improvements to untreated water facilities and new water main installations. In 2011, it spent $72 million.

The investments are funded largely through contributions from the counties and through the issuance of revenue bond debt.

From 2002 to 2011, debt service charges to the utility's operating budget grew from $15 million to $30 million. In recent years, Chow said, much of the spending has paid for projects required by the EPA under the Clean Water Act.

Rawlings-Blake, a co-chair of the U.S. Conference of Mayors' Water Council, said she is optimistic about the direction the utility is headed. But she agrees that residents can't be expected to pay increasing water rates forever — which is why she has argued strongly for more federal infrastructure funding.

"The model that we have is not sustainable long-term," she said. "We can't continue to make the investment that's needed to get into this proactive infrastructure investment, as opposed to [being] reactive to water main breaks and disasters.

"We're not going to get there on the backs of ratepayers. We need to find another way."

To address some of the concerns about higher rates, the city has established a grant program for low-income residents and a discount program for senior citizens.

Still, rate increases are likely to continue. And this summer, the city will institute a remediation fee for stormwater management, which the state required last year to help clean up the Chesapeake Bay.

That fee will likely cost residents about $72 annually, and bring in about $30 million, Chow said — a drop in the bucket compared to overall needs.

According to a review of Baltimore's water system by the local chapter of the American Society of Civil Engineers, the city's 2011-2016 capital budget called for spending more than $1 billion on water supply improvements, including the construction of a new treatment plant at Fullerton. Overall, the ASCE found, the city has more than $5 billion in immediate wastewater infrastructure needs.

Public works officials confirmed the $1 billion capital budget projection, but said they could not confirm the $5 billion estimate for wastewater needs.

A recent independent forecast of the city's fiscal standing found that agencies are facing a $1.1 billion deficit in the next decade, but the estimate did not include water and public schools infrastructure needs.

City officials realize they're facing an uphill battle, but hope the new asset management division will help find savings. Officials said the division, a combination of management, financial, economic, engineering, and other related practices, will prioritize projects that best serve the city for the least amount of money.

Eger, of the Water Environment Federation, called it "a very smart approach."

Chow said Baltimore will gain an even bigger advantage if the EPA agrees to some of the city's requests regarding the list of federal mandates and consent decrees that have required the city to invest hundreds of millions of dollars in sewage control and protection of outdoor drinking water resources.

"All of these revenue streams we've increased in the past have gone to these unfunded federal mandates," Chow said. "The mandates are killing us."

Officials would not provide a copy of the report they submitted to the EPA, which they said is still in a working phase.

Rawlings-Blake — who helped bring the EPA to the planning table with cities across the U.S. through her work with the Water Council — said the city has asked the EPA to allow forward-looking water main replacements to be prioritized alongside federally mandated projects.

The EPA's current "lack of flexibility" is frustrating, the mayor said, but she's hopeful the new plan just submitted by the city will be helpful.

David Sternberg, an EPA spokesman, confirmed the agency is reviewing the city's plan and intends to meet with Baltimore officials soon, but declined to comment further.

Chow said he hopes Baltimore and its partners — Anne Arundel, Baltimore, Carroll, Harford and Howard counties — will reach a period where proactive project successes outnumber reactive disaster responses. A key to reaching that goal, he said, is having the counties agree to take more of a stakeholder role, as opposed to a customer role.

He and county leaders expressed confidence that an agreement will be reached, though details about how county contributions to the system will change have not been determined.

"I think everybody's heart and head is in the right direction, it's just the mechanism of getting something on paper that we can sign and live by," said Jim Irvin, director of the Howard County Public Works Department. "And thankfully, there seems at this point to be some progress being made."

Developing a utility asset management division that will use predictive modeling to better locate vulnerabilities.

Negotiating with suburban counties that use the city water system to increase systemwide cost sharing.

Submitting an integrated planning framework model to the Environmental Protection Agency arguing for more leeway in balancing mandates from the agency under the Clean Water Act with the immediate demands an aging system.

Rolling out a new remediation fee for stormwater management, as was required by the state last year, creating a designated stream of operating revenue to deal with trash and other pollutants making their way into the Chesapeake Bay.